The former editor of the Sun, Kelvin MacKenzie, has said that the Leveson inquiry into press ethics was set up by the prime minister in an attempt to "escape his own personal lack of judgment" over his hiring of the former News of the World editor Andy Coulson.

MacKenzie, now a columnist at the Daily Mail, told a seminar arranged by Lord Justice Leveson that David Cameron made a mistake when he appointed Coulson as his director of communications in an attempt to curry favour with Rupert Murdoch.

"It was clearly a gesture of political friendship aimed over Andy's head to Rupert Murdoch," he said. "A couple of calls from central office people would have told him that there was a bad smell hanging around the News of the World."

Describing the inquiry as "ludicrous", MacKenzie said: "This is the way in which our prime minister is hopeful he can escape his own personal lack of judgment. He knows, and Andy knows, that he should never have been hired into the heart of government. I don't blame Andy for taking the job. I do blame Cameron for offering it."

MacKenzie attacked "Cameron's obsessive arse-kissing over the years of Rupert Murdoch. Tony Blair … was pretty good, and Brown wasn't too bad. But Cameron was the daddy of them all."

He added Cameron was wrong to believe the Sun would help to secure him victory in last year's general election and should not have courted its leading executives in the UK so assiduously.

MacKenzie also claimed it was not Murdoch's decision to drop the Sun's support for Gordon Brown two years ago. "Whoever made that decision should hang their head in shame. I point the finger at a management mixture of Rebekah Brooks and James Murdoch."

He said Murdoch had told him on the day that edition of the paper was published that Brown had phoned the media mogul and told him: "You are trying to destroy me and my party. I will destroy you and your company." MacKenzie added: "That endorsement that day was a terrible error."

Earlier in the day, Paul Dacre, the Daily Mail's editor in chief, addressed the hearing, telling an audience of Fleet Street executives, lawyers and regulators, that he will introduce a corrections and clarifications column on page two of the paper next week. Sister titles the Mail on Sunday and Metro will follow suit.

Dacre made the concession in a rare and remarkably candid speech in which he also attacked Cameron. The editor said he "unequivocally condemned phone hacking and payments to police", and described them as a disgrace. But he criticised the government for responding to the scandal at the NoW by setting up "a judicial inquiry with more powers" than the Chilcot inquiry into the Iraq war.

"Let's keep this all in perspective," said Dacre. "The banks didn't collapse because of the News of the World." Neither did the paper cause August's riots or prompt MPs to steal from the constituents they represent through expenses fraud, he argued.

Dacre criticised the panel of experts who are advising Leveson, describing them as "a panel of experts who, while honourable and distinguished people, don't have the faintest clue how mass-selling newspapers operate". They include former Daily Telegraph political editor George Jones and Elinor Goodman, former political editor of Channel 4 News.

Dacre, who chairs the editors' code of practice committee, insisted that the Press Complaints Commission - which is responsible for enforcing the code - did good work and said introducing fines would be counterproductive. "I profoundly regret that a prime minister who had become too close to News International … made a cynical act of political expediency [by saying] the PCC was a failed body," he said. However, in a significant concession, Dacre also said that a press ombudsman – possibly chaired by a retired judge or civil servant and possibly advised by former editors from both sides of the newspaper spectrum – could be created to sit alongside the PCC. He added it "would have the power to summon editors, name offenders … and, in cases of the most extreme malfeasance, impose fines".

The Daily Mail editor added that the major problem facing the press today is the acute commercial crisis, noting "the depressing fact that the newspaper industry is in a sick financial state". The consequence of that, particularly at a local level, he added, is that: "Courts aren't covered, councils aren't held to account." Dacre said that caused a "democratic deficit which itself warrants an inquiry".

He said: "The most virulent criticism of self-regulation comes from newspapers that lose eye-watering amounts of money and which are subsidised either by trusts or Russian oligarchs … They are free from the compulsion to connect with enough readers to be financially viable."

Mounting a passionate defence of tabloid newspapers, Dacre added on Wednesday night that popular papers could be "vulgar, irreverent, outrageous and even malign. They also represent the views of millions of Britons."

Conservative MP Louise Mensch disputed Dacre's defence of the PCC, saying that it manifestly does not work in its current form.

"I think it was absolutely ludicrous of Mr Dacre to suggest at some length there was no problem whatsoever," she told Newsnight. While Mensch, a member of the culture select committee, broadly back self-regulation, the comedian Steve Coogan said the system had failed. "[It] palpably failed in the biggest single test of its existence in the last 20 years in the hacking scandal. It did nothing," he said. Coogan said he would be delighted if the Daily Mail went to the wall tomorrow, accusing Dacre of pandering to the public's worst fears and prejudices.

Mensch agreed Dacre was "being disingenuous", pointing to Operation Motorman, a 2006 inquiry into the use of private investigators by the press, which found the Daily Mail topped the list of newspapers that paid for information that the Information Commissioner's office believed was likely to have been obtained illegally.

• This article was amended on 13 October 2011. The original referred to the "Press Complaints Commission editors' code of practice committee". This has been clarified: the PCC is responsible for enforcing the code produced separately by the editors' committee.